Question

The total utility is maximum when _______.

• A. marginal utility is zero
• B. average utility is the highest
• C. marginal utility is the highest
• D. marginal utility is equal to average utility

Answer 1

The correct option is A marginal utility is zero

As a person purchases more and more of a product, the marginal utility to the buyer gets lower and lower, until it reaches a point where the buyer has zero need for any additional units of the good or service. At that point, the marginal utility of the next unit equals zero, while as can be seen from the diagram the total utility is maximum at this point.